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arXiv · 1805.00109

Quantum computational finance: Monte Carlo pricing of financial derivatives

Patrick Rebentrost·Brajesh Gupt·Thomas R. Bromley
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Abstract

Financial derivatives are contracts that can have a complex payoff dependent upon underlying benchmark assets. In this work, we present a quantum algorithm for the Monte Carlo pricing of financial derivatives. We show how the relevant probability distributions can be prepared in quantum superposition, the payoff functions can be implemented via quantum circuits, and the price of financial derivatives can be extracted via quantum measurements. We show how the amplitude estimation algorithm can be applied to achieve a quadratic quantum speedup in the number of steps required to obtain an estimate for the price with high confidence. This work provides a starting point for further research at the interface of quantum computing and finance.

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Patrick Rebentrost, Brajesh Gupt, Thomas R. Bromley. 2018-04-30. Quantum computational finance: Monte Carlo pricing of financial derivatives. https://doi.org/10.1103/physreva.98.022321

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